M&M acquires Ssangyong - Can we say that finally?

Okay, we have been hearing about the Mahindra & Mahindra acquisition of Ssangyong for a while now and no further developments have been heard of; however, there is definitive news that M&M will buy a majority stake in the smallest of the Korean car makers, Ssangyong, by end-2010 or early 2011. At this stage there are no details of the amount involved in the acquisition. M&M mentioned that it will go through the final due diligence of Ssangyong sometime in September 2010 and then fix the deal.

Not many people have seen Ssangyong cars, rather SUVs - that is what this Korean car maker specializes in - low-priced, robust SUVs. The Korean SUV maker has vehicles like Rexton, Kyron, Rodius and one sedan in its entire line-up - the Chairman.

M&M, through this deal, can expand its line-up of SUVs; but when it comes to sedans - the basic ingredient for any versatile car maker - I can only hope that M&M does not have another sour experience like the Logan. Ssangyong, on the other hand, will not go bankrupt and have access to more markets and M&M's technology. With this deal, M&M is giving out all the signals that it intends to focus on SUVs - at a time when people are selling off their gas guzzlers and shifting to more fuel-efficient vehicles. Lets hope that M&M becomes the phoenix of the SUV market , and brings out SUVs that suit the taste and needs of the present and future markets - vehicles with more high-end torque, yet thrifty on fuel consumption.

Here is a ball-park SWOT analysis of M&M:

Strengths: Well established as an utility and farm equipment manufacturer. Has dealer networks in the US, South Africa, Latin America and other key markets. Diversified business and hence the group has financial stability. Few model line-up in the passenger vehicle segment, hence less complexity. Has the advantage to design a new global vehicle platform and bring out different products. Has been making vehicles since the 1940s and has a lineage of sorts.

Weaknesses: Does not yet have a mass-market sedan or hatchback - and hence missing out on the major passenger vehicle market share. Has not yet reached the levels of international collaboration needed to bring out world-class petrol/diesel engines in the 1.3 to 1.6 liter displacement range, to be globally viable. Vehicle platforms are dated and the company is still perceived as essentially commercial vehicle manufacturers. Cannot really go global with just utility vehicles and SUVs. The Scorpio cannot sustain M&M for long.

Opportunities: Emerging markets in South Asia, like Vietnam, Thailand and Indonesia, markets in Eastern Europe, like Russia, Turkey, et al and Latin American markets. M&M needs to develop a small/mid-segment sedan or hatchback to shares in these markets. The acquisition of Reva holds lot of potential. M&M should aggressively pursue electric vehicle development at this moment, and if done properly, the company will have a headstart over many smaller but global players. M&M should invest its research rupees in developing a global small SUV - which is the fad and demand of the day. It already has the expertise and just needs to tweak the engine and platform a little bit.

Threats: The biggest threat for M&M is Tata Motors and the Chinese companies. Other OEMs comparable to M&M are increasingly entering into technology sharing partnerships and thus have access to better technology. Consumers in India and other potential markets have more options to choose from and if M&M does not diversify its product portfolio it will lose out to competition.

For those who have not seen Ssangyong vehicles:

                                                                           Rexton